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Malone v. Maddox2/25/2003
h can be recovered under the UM coverage.
We reject the policyholder's argument that the language "all damages" does not include prejudgment interest. We also reject the policyholder's argument that the reference to prejudgment interest in the damages section of the liability feature of the policy in some way means that prejudgment interest is not a part of "all damages" under the UM coverage. Under the liability feature of the policy, prejudgment interest is a part of the covered damages because the policy says it is. Under the UM coverage, it is a part of the covered damages because "all damages" means just that, all damages, and, by statute, prejudgment interest is an element of the injured party's damages.
C.
The policyholder argues that the trial court's judgment is at odds with a public policy underlying the prejudgment interest statute. She contends that the statute embodies a policy encouraging the prompt settlement of claims with merit. She argues that if the lower court's judgment is allowed to stand, it will, in effect, deprive an insurance company of any incentive to settle a meritorious UM claim objectively worth more than the limit of coverage under the policy. We disagree.
In general terms, an insurance company has an incentive to settle a UM claim with merit in order to eliminate the possibility of a damage award that includes prejudgment interest. When the value of a UM claim arguably exceeds the UM limit of coverage, the insurance company still has motivation to settle for a number of reasons, not the least of which is fear of the imposition of a bad faith penalty under Tenn. Code Ann. ยง 56-7-105 (2000). In any event, we hold that the conclusion reached by the trial court with respect to prejudgment interest does not violate an established public policy of this state.
D.
The policyholder cites a number of cases from other jurisdictions. In our judgment these cases are not authority for the positions asserted by the policyholder in this case.
In Cox v. Peerless Ins. Co., 774 F. Supp. 83 (D. Conn. 1991), a federal court, applying a Connecticut statute, imposed prejudgment interest, noting that " n award of prejudgment interest arises from a defense attorney's strategic decision to reject an offer of settlement, and proceed to trial." Id. at 86. Under the Connecticut statute, however, a court is required to impose interest when the plaintiff recovers "an amount equal to or greater than the sum certain stated in [the plaintiff's] `offer of judgment.'" Tennessee does not have a similar statute. We do not find the Cox case persuasive on the facts before us. Three other cases cited by the policyholder, Sotelo v. Washington Mut. Ins. Co., 734 A.2d 421 (Pa. Super. Ct. 1999), Vasquez v. LeMars Mut. Ins. Co., 477 N.W.2d 404 (Iowa 1991), and Potomac Ins. Co. v. Howard, 813 S.W.2d 557 (Tex. App. 1991), involve direct actions against insurance companies for breach of contract. None of these cases are implicated by the facts now before us.
VI.
The judgment of the trial court is affirmed. This matter is remanded to the trial court for enforcement of the judgment below and for collection of costs assessed in the trial court, all pursuant to applicable law. Costs on appeal are taxed to Teresa Malone.
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